Another week and a big update on the refinance. We had an appraiser came by our place last week and we got the report’s results Friday. The woman stopped and was really sweet. I went through the house with her as she asked questions. She then said she’d be exploring the neighborhood and getting some comparable homes.

House Appraised For Much Lower Than We Expected

Our townhouse is now valued $20,000 less than what the county assessor lists it. We can go ahead and continue with the refinance, but we’d have to also pay mortgage insurance, which would eat up the savings.

Builder Problems Are Our Problems Now

A development we recently found out about was the builder for the development is having financial troubles. They build in different states and while their homes in Raleigh are steadily selling (not a sizzling market, but solid) their other locations are not. In fact, they’ve been pushed to sell their remaining inventory as quickly as possible even if that means lowering their prices.

That means that new builds are starting off at cheaper prices. That of course lowers our values. If you could get a new house built for about the same prices, wouldn’t you go for it rather than a 2 year place lived in by another family?

Combing over the appraisal, though, I feel good about the long term prospects of the townhouse. She had some notes regarding our place and the area that matched up with why we purchased it in the first place.

• This area is developing fast.Shopping centers are nearby and some of the best schools are in this part of town.
• Congestion is being addressed. The one drawback with this area was the traffic at certain points of the day and that’s getting addressed now. Roads are getting widen and new roads have been created to accommodate the new neighborhoods coming up.
• We’re the most affordable neighborhood in this area. Prices just a block away and there really isn’t much in our price range elsewhere. On the other end of the street, new town homes are coming up (different builder) and their prices start higher than our neighbor’s high end.

So I guess it’s wait and see for us. Hopefully we can refinance at a later time and the interest rates will be favorable. If not, we’re alright. Our mortgage payment is within our budget and we’re happy that it’s not underwater.

Oh what about that $500 that’s unaccounted for? That was what we paid as a good faith deposit for the refinance. We won’t be seeing that soon, will we?

Next Steps with Our Finances

One thing that we want to do this week is to send this information to see if we can have our property taxes lowered, by presenting the appraiser’s report. Perhaps we can shave off just a little bit of money.

However, it looks like it might be difficult. Here’s what I read on the county’s site:

Wake County assessed real estate values reflect the market value as of January 1, 2008. Any inflation, deflation or other economic changes occurring after this date do not affect the county’s assessed value of the property and cannot be lawfully considered when reviewing the value for adjustment. The January 1, 2008 assessed values remain in effect until the next county-wide revaluation, which is currently performed every eight years.

There’s an appeal process, but as I’m understanding it, we may not qualify.

Please note that changes in market or economic conditions occurring after the effective date of a revaluation cannot be lawfully considered when reviewing the assessed value for adjustment.

(This will be a fun process…..)

We’re still going to try though, so maybe some financial good can come of out of this recent appraisal.

Thoughts on Appraisals

Getting the bad news Fr iday certainly made for a happy weekend- we decided to stay at home and enjoy our undervalued place. Perhaps we’ll get started on some small projects to spruce it up.

How much is your home worth? What value is your property tax based on? How much do you think it’s really worth?

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Working out a solid home budget is an important part of getting your finances in shape for 2012. While most people have a noble goal of getting out debt, they don’t always put together an accurate home budget. It’s easy to input the expenses for a home mortgage and car payment. But there are other very important expenses that are often neglected.

Annual Memberships

Trying to pay for an annual membership in one lump sum can leave your budget hurting when the time comes. Soften the blow and simplify your life by making this a monthly expense. Add up all of your annual memberships to come up with a grand total. Divide that by twelve and you have the amount that should be set aside every month. Be religious about putting this to side to avoid being short when the renewal hits your mailbox.

Property Insurance

Most mortgage companies require that the property insurance is escrowed along with the property taxes. If yours does not, however, then you must carry the property insurance on your own. This is not a negotiable expense that can be paid or not based on how the month is going. It is just as important as your grocery budget and the rent payment. You can make it more affordable by choosing a higher deductible, but you should make sure that you are covered and that the payments are made on time every month.

Vacations

All work and no play will make you crazy, but vacations are expensive. Try to also set aside a monthly amount to cover a vacation. It will allow you to pay cash when the time comes, and you can start planning something early to build the excitement.

Holidays and Special Occasions

You know that it’s easier to shop for those holiday presents throughout the year, but most people don’t set aside money for it. Create a little slush fund just for gifts. Start by sitting down and adding up how much money you spend on presents throughout the year. Include little items you buy for co-workers and friends. Determine the monthly amount and then create a little slush fund just for these occasions.

Home Repairs

Most people don’t put this in a budget because it’s not a regular expense. But when something breaks, you are going to have to pay to have it fixed or replaced. It’s hard to determine how much you should allow for repairs. You can start by considering how much money you spent last year on various repairs and then dividing that by twelve. You can also simply set aside twenty or thirty dollars a month and adjust that amount at the end of the year. If you have older cars, you might want to set aside a little more.

Back to School

Parents with kids going to school for the first time are often shocked at the high cost of back to school. You can easily drop between fifty and a hundred dollars on each child’s school supplies, and that doesn’t count the cost of new clothes and shoes for the year. This can leave you scrambling when August rolls around, or sending your children off to the first day of school without their basic school supplies. You also have expenses throughout the year for class pictures, extra-curricular activities and field trips. Take the sting out of these events by setting aside some funds every month.

Property Taxes

The tax man cometh; and you need to have the funds ready to make the payment. Cash rewards and other perks will arrive without the companies withholding any taxes, but you will still have to claim them as income and pay the taxes at the end of the year. Any time you receive extra money that was not taxed, pull out ten percent and put it in a separate account. Property taxes that are not escrowed through a mortgage payment must be covered. Many a home has been lost to the government because the property taxes were not paid in full. Set up a savings account for the property taxes, and make monthly payments into that account.

Thoughts on Budgeting for Home Expenses

Home budgeting doesn’t have to be difficult. Taking control of your finances with a solid budget can help you create a better financial situation for yourself. You can create slush funds to handle life’s little surprises. You can also turn all of those annual expenses that are so painful into monthly ones that you barely notice.

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Our three bathrooms still have the original finishings and are starting to look dated. Although bathroom remodeling costs have a high rate of return at resell time, it would be a pretty penny to tackle three of them!

This is where my hours of watching HGTV are finally paying off. Here are five ideas for making over the bathrooms with a low price tag.

Replace Light Fixtures

Swapping out out of style light fixtures with a current style can quickly refresh the look of any room. Be sure to pick a style that will integrate with the overall design and look of the room. The price range for a new light fixture can range from $20 to over $500, but you can find a very nice light in the $50-$100 range.

Frame Your Mirror

I’ve noticed the trend in bathroom mirrors is to have them framed. Ours are the traditional style of mirror which is affixed directly to the wall. One of my friends told me about kits to frame the mirror without having to remove it from the wall.

Since our mirrors have started to lose some of the silvering around the edges, this solution has the extra benefit of masking that problem. The kits are available in a wide variety of finishes and materials with a price range of $150 – $250.

Change the Color

Yes, painting the room a more contemporary color is a fast and easy way to refresh the look of a room. But did you know that you can repaint that pink or blue bathtub?

It is a lot of work due to the requirement of sanding down the entire fixture before applying the porcelain paint. However, it can save a lot of money especially if your bathtub is tiled in. Since toilets and sinks are relatively cheap, I would replace them versus repainting.

Reface Cabinets

It can be costly to replace bathroom cabinets, especially when they’re attached to or built into the walls. A trick you may know from kitchen remodeling is to replace only the doors. New doors can move the look from the 1960′s to contemporary. We need to strip the white paint off our cabinets and refinish along with attaching new doors.

Replace Hardware

The hardware I’m speaking of includes the faucets, toilet paper holder, towel racks and cabinet handles or pulls. Make sure the style for all of these are complementary and the same color.

These are easy to overlook because you see them every day but can add up to making the room look old.

Just because you don’t have $10-30 thousand dollars doesn’t mean you can’t remodel your bathroom. Get a great new look for under $1,000 with these tips. What changes do you want to make at your home?

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On the surface a reverse mortgage seems like a good idea.  And it is for some people.  Before anyone gets one they should make sure all options are explored.

What are Reverse Mortgages ?

A reverse mortgage is an option for homeowners age 62 and older to convert their home equity into cash.  There are no loan payments required until the owner no longer lives in the home or stops meeting the requirements of the mortgage.

In addition to the standard loan fees (appraisal, closing costs, etc.), this type of loan requires the borrower pay for mortgage insurance.   The home must also be in very good condition and repairs will be required for any deficiencies.

Alternatives to Reverse Mortgages

My father-in-law could no longer make ends meet after the loss of his wife and her social security income a few years ago.  He opted to get a reverse mortgage, but I don’t think he seriously considered any of these options below.

Shared Housing

Many people moved to shared housing during the recession, but it is also a good way for seniors to decrease living costs and still remain in their own home.  Renting out a bedroom or two would have easily replaced my mother-in-law’s social security check.

For those that don’t want to share living space their home may accommodate converting the basements or one floor to an apartment or in-law suite.

Downsizing

Often seniors can get the financial breathing room needed by selling their home.   They no longer need the space of the family home and it may require more upkeep.  Renting or buying a smaller home would have eliminated the costs my father-in-law occurs keeping up a yard and repair on a 60 year old home.

Other Deferred Payment Loans

Some state and local governments offer deferred payment loans to low-to-moderate income homeowners.  These can usually be used for specific home repairs and modifications.   In California, the CalHome program distributes money through local agencies.

There are programs for property tax deferral although many state and county governments have suspended them since the economic crisis began.  These were generally available to seniors and/or handicapped homeowners and deferred the property tax bills until the home was sold.

After evaluation some homeowners and/or their families will come to the conclusion that a reverse mortgage is the best option to give them extra funds during retirement.  It is recommended to put off getting this type of loan until needed to reduce the interest rate charged and qualify for larger advances.

Would you recommend a reverse mortgage to your senior friends and family?

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Owning a home is a dream of some people, but there are many that either feel like it’s impossible for them to achieve it. I will say up front that I don’t think home ownership isn’t for everyone. If you’re not willing to put in the legwork and run the numbers, it can be a huge financial and emotional burden.

If you’re really intent on buying a home, taking the time to get a financial plan in order can be a huge step in helping you reach your goal. It can also provide you a way to make home ownership a relatively enjoyable experience.

Keeping Total Housing Costs 30% or Less

When we first were married we had a desire to own a house at some point in the future. At the time however, we knew that we weren’t financially or emotionally ready for the big responsibility. We focused on handling that first before we even gave serious thoughts to house hunting.

The biggest financial preparation was getting into the mindset of living off of one income. Even though we’ve been a two income couple, we felt that living simpler and below our means would help us reach some of goals quicker. At the time, they included:

• Having a decent size emergency fund.
• Pay down high interest debt (like my car loan)
• Have some savings set aside for a house down payment.
• Have wiggle room in the budget to go on some vacations and eat out a bit.

It would’ve been impossible if we tried to do it all while having our day to day budget be based on both incomes. I was an intern at the time, so it made sense to us to base the family budget on my husband’s pay. We’ve done our best to keep to this system.

When we were looking at a house to buy, we also made the choice to focus on only one income. For us, it meant that we  focused on keeping the numbers based on net pay, not gross income. While we could’ve looked at more houses in “our price range”, we decided to stay within our self imposed limits. It gave a us measure of comfort, knowing we were having a bit off buffer with our finances.

Another reason for us to be conservative was our goal to have a reasonable interest rate with our mortgage. We knew that in addition to the down payment we’ll put down, the lenders were looking at a couple of other numbers to determine the interest rate they offered.

Debt to Income Ratio

Having a high amount of debt can ruin your chances of getting a loan. Lenders want to know that you can make these payments for years down the line and your debt to income ratio is one thing they analyze.

Your debt to income ratio is calculated by simply taking all your debt (student loans, credit cards, car loans, etc) and dividing that amount by your income.  You want to make sure your ratio is lower rather than higher. If your debt to income ratio is higher than 36%, you could have a hard time qualifying for a mortgage.

Loan to Value Ratio

Another reason to take your time and build a down payment is the loan to value ratio and how it affects your chances of getting a mortgage. The loan-to-value (LTV) ratio is basically the mortgage loan amount you’re hoping to get divided by the appraised value of the property you’re considering to buy.

Your Other Financial Goals

This is important becuase lenders and real estate agents don’t figure this into their calculations. Your lifestyle will be affected significantly unless you plan accordingly.

• Do you have enough to save for retirement?
• Can you stash money away for your child(ren)’s college fund?
• Can you go on the vacations you want to go on?

What If You Really Want to Buy a House?

Buying a house can be a great financial and personal goal to have if you prepare ahead of time. You have basically have some options to look at carefully before you make a final decision.

• Be patient and wait a bit until you buy your house. Give yourself more time to have a bigger down payment. This will lower your mortage loan amount you’d need. Prices could stay lower than normal with unemployment problems continuing.
• Focus on getting a starter home. You can still buy a home, but you might consider getting something a bit more inside your price range, so you have bigger amount of wiggle room. If you’re buying your first home, a starter home can a better option. You may upgrades years down the road or you might find you like the house and stay.
• Go for the home. If you’re in a position to get the home you want, that’s great. Just make sure you double check it is something within your budget. Otherwise, consider the first two options.

Our Essential Housing Expenses

If you’re thinking about being a home owner, here’s how our current housing costs break down to give you an idea of what to expect:

• Mortgage         $ 661.57
• Escrow  *         $192.18
• HOA Fees        $112

Total                             $965.75

*Our escrow account takes care of homeowners insurance and property taxes.

Of course the numbers will be different for everyone, but it’s good to get an idea of what actual people are paying. Some may note we don’t include home repairs that may come up from time to time with our calculations. We have done is set aside savings which includes covering such expenses. It’s a new community and so far we haven’t had to make any big repairs. Additions such as adding ceiling fans to the rooms are done on a cash basis, we plan ahead for the small projects and save money up for the purchases.

Currently our housing expenses have been steady. The only big purchase we had to make since we bought it was the washer and dryer set. We bought those used off of Craigslist and they had served us well. Once they both stopped doing their washing and drying properly (2 cycles sometimes), we bought another set with savings we had set aside.

Thoughts on Buying a House You Can Afford

How did you how much mortgage you could afford? Did you rely on the estimate from the lenders or did you run the numbers yourself? Did you receive any pressure from your real estate agent to get a more expensive house? If so, how did you cope with it?

If you’re a home owner, what kind of mortgage did you get and why?

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